Our View: Shameful regulatory results in payday lending

The payday loan industry successfully fought off any new attempts to protect borrowers during the last legislative session.

Sadly, what we've learned since is that the limited regulations that do exist are not being enforced.

Louisiana's Office of Financial Institutions is supposed to regulate payday lenders across the state.

But a report from Legislative Auditor Daryl Purpera's points out that from Jan. 1, 2010, to June 30, 2013, the regulating agency issued more than 8,300 citations to lenders but did not impose any penalties for violations of state laws and regulations. Instead, it issues orders that lenders don't have to obey because OFI doesn't follow up on its orders to see if consumers were issued refunds when violations occurred.

Not forcing lenders to follow proper practices could result in what the report calls a "cycle of debt."

"Overall, we found that OFI needs to strengthen its examination, follow-up, enforcement and complaint procedures to ensure it is effectively regulating payday lenders," the performance audit says. "OFI cannot ensure that payday lenders are adhering to state laws and that borrowers are protected from improper payday lending practices."

The agency failed to follow up on 6,612 (62 percent) of the major violations, so there's no way of knowing if most borrowers who were overcharged received a refund.

State law gives OFI authority to impose fines of up to $1,000 per violation and suspend the licenses of lenders. But the regulator has not developed a "penalty structure or process" for enforcing penalties.

"OFI is failing to hold lenders accountable for adhering to state law. In addition, payday lenders may not be deterred from repeatedly violating the law," the report says.

No penalties were imposed despite citing 8,315 violations, including almost 8,100 of which that were termed "major violations," those associated with overcharges requiring refunds.

Most people who seek payday loans don't have the financial or banking resources available to those with established banking relationships and decent credit scores. They're living paycheck to paycheck, almost, and a car repair or a medical bill can put them into the position of having to borrow to keep the utilities connected.

So while we buy into the payday lenders' basic argument that they are providing a needed service for people with no alternative and emergency needs, we don't buy into the practice of repeated loans and rolling over loans at interest rates so high some are trapped in a cycle of debt.

And we find it shameful and disgraceful that the limited regulations protecting "the least of us" are not enforced.

Purpera was correct to call the public's attention to this outrage with his audit. The administration of Gov. Bobby Jindal should take note of this abdication of its responsibility and immediately correct the deficiencies in the Office of Financial Institutions.

And we remind legislators, particularly those in northeastern Louisiana where the poverty rate is high and payday lenders thrive on many corners, that their constituents are caught up in this cycle of debt and the next time they have an opportunity to develop a reasonable solution to it, they should.

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Our View: Shameful regulatory results in payday lending

The payday loan industry successfully fought off any new attempts to protect borrowers during the last legislative session.